Reference no: EM132814603
Question -
Q1. In 2020, JayR and Royskie agreed to contribute equal amounts into a new partnership for a 50%-interest in profit (loss) and in capital to each of them. Their respective contributions will come from old proprietorships they owned and will both be dissolved.
JayR contributed the following items and amounts:
Cash 468,000
Machineries (book value) 320,000
Royskie contributed the following items at their carrying amounts in the proprietorship records:
Accounts receivable 60,000
Inventory 168,000
Furniture and fixtures 321,600
Intangibles 138,000
All the non-cash contributions are not properly valued. The two partners have agreed that
I. P 4,800 of the accounts receivable are uncollectible
II. The inventories are overstated by 12,000
III. The furniture and fixtures are understated by 7,200
IV. The intangibles include a patent with a carrying value of 8,400, which must now be derecognized due to the result of unsuccessful litigation promulgated by the court just before the partnership formation.
What is the fair value of the machineries invested by JayR into the partnership?
Q2. The following balance sheet for the partnership of LuzVisMin was taken from the books on October 1, 2020.
Cash 200,000 Accounts payable 400,000
Other assets 800,000 Luz, capital 240,000
Vis, capital 190,000
Min, capital 170,000
Total 1,000,000 1,000,000
The profit and loss agreement among the partners follows:
I. Annual salaries to Luz and Vis of 10,000 each. Annual interest of 5% on beginning capital.
II. Bonus of 15% to Luz based on income after salaries, interest and bonus.
III. Remaining profit, 25% to Luz, 35% to Vis and 40% to Min.
The partnership began is operations on October 1, 2020. Net income for the year ended December 31, 2020 is 139,000. Which of the following statements is true?